The New York-based advisory firm failed to disclose agreements with overseas product and service providers that resulted in commissions being paid to advisers and “an overseas affiliate”, according to the US Securities and Exchange Commission.
The affiliate was not named in the SEC document but described as a third-party product provider.
The SEC found that the undisclosed commission – including an amount equivalent to 7% of the pension transfer value – created an incentive for deVere USA to recommend a pension transfer and particular product or service providers.
The company also made materially misleading statements concerning tax treatment and available investment options, the regulator said.
Without admitting or denying the findings, deVere USA “consented to the SEC’s order, which finds the firm violated the Investment Advisers Act of 1940, including the antifraud provision, and imposes remedies that include an $8m (£6m, €6.8m) penalty and engaging an independent compliance consultant”, the SEC stated.
Filed charges
The US regulator also announced it is also taking separate action against two former deVere USA investment adviser representatives, one of whom was chief executive of the firm.
Charges have been filed against chief executive Benjamin Alderson and former manager Bradley Hamilton.
It is alleged that they misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including upfront commission of 7% that Alderson and Hamilton personally stood to receive.
The SEC’s complaint against Alderson and Hamilton alleges that they violated the Investment Advisers Act and it is seeking an injunction, disgorgement plus interest, and civil money penalties.
Marc Berger, director of the SEC’s New York regional office, said: “Investment advisers have an obligation to disclose direct and indirect financial incentives.
“DeVere USA brushed aside this duty while advising retail investors about their retirements assets, and today’s settlement will result in a Fair Fund distribution to deVere USA’s retail clients who were deprived of this information.”
DeVere statement
A spokesperson for deVere USA said the company “is pleased to announce that the SEC has accepted its offer to settle an administrative proceeding relating to certain aspects of its historical business in the US”.
“The settlement clears that way for the company to continue to develop its investment advisory business in the US,” the spokesperson added.
DeVere USA has hired a new management team and “strengthened its overall systems and controls”.
“As part of its settlement with the SEC, the company has agreed to retain an independent compliance consultant to conduct annual reviews over the next three years,” the spokesperson said.
Pension transfers
This is not the first time that deVere has encountered difficulties with pension transfers.
DeVere UK stopped providing advice on overseas pension transfers in February 2017.
At the time, a deVere spokesperson said the company had “entered into a voluntary requirement to cease providing advice in this arena”.
Martin Boon says:
No surprise here – it is a shame what they got away with when I had the misfortune to be their Client when I was in UAE
James Caldwell says:
Is it not time that the FCA took equally strong action against firms and specific individuals that purport to offer one thing “from the UK” but mislead “clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest” which create an incentive for the firms to recommend a pension transfer and particular product or service providers which are often connected by name and share ownership often offshore?
How come the SEC can do what the FCA fails to do with British pensions?
Bethell Codrington says:
Perhaps readers should read the whole story? Links below. There is a bit more too it than the headlines above.
https://www.sec.gov/litigation/admin/2018/ia-4993.pdf
https://www.sec.gov/litigation/complaints/2018/comp-pr2018-101.pdf
Bethell Codrington says:
Thanks to Chris for also finding from IA in 2014:
https://international-adviser.com/devere-usa-york-mind/
Roger Berry says:
Thanks To Bethell, those documents make interesting reading. The SEC document appears to state that a transfer of pension rights to a QROPS for a US citizen ( presumably their actual residence is not important) creates a distribution, thus taxes arise in the USA on the gains and income that have accrued in the plan? Thus potentially making such transfers hugely tax inefficient. If so, a matter of some consequence for all advisers and trustees involved in QROPS/SIPPs transfers for US citizens.
Bethell Codrington says:
A lot of US citizens might be getting a nasty visit from IRS soon, wanting a big chunk of tax.
The dangers of dealing with Product Sales people who have done a three day training course on how to sell a QROPS and Life Wrapper, but no idea of the implications or complexity required to give advice. They wouldn’t even know what something as simple as an FTC was, let alone anything else….
adkinson@private-capital.com.hk says:
This will also be useful for the SFC in HK for their subsidiary firms, alas though as they are NOT regulated by the SFC, much too onerous so they choose a lesser regulator. It will still be passed on though.